Thursday, September 30, 2010

Warren: Regulation Will Help Customers and Banks

The newly appointed Consumer Financial Protection bureau adviser Elizabeth Warren has spoken up, and is claiming that financial regulation consolidation will benefit both consumers and banks alike. On Wednesday she gave a speech and shared her hope that Americans will begin seeing banks as friends and not enemies.

"Instead of seeing banks as their friends, as I did when I put my babysitting money in a savings account at Penn Square National Bank so my brothers didn't borrow it out of my sock drawer, too many Americans see dealing with banks like handling snakes - do it long enough and you'll get bit," she said in a speech Wednesday to the Financial Services Roundtable in Washington.

She said the new law will force banks and non-bank lenders to be subject to federal examination and will consolidate consumer financial protection activities performed by seven different agencies into one agency, "closing gaps in oversight."

Warren said the purpose was to make these lenders more palatable and user-friendly for the American people.

"Thanks to the new law, for the first time ever, we will have a single federal agency charged with writing the rules for all mortgages and all credit cards, regardless of whether they are issued by a federally chartered bank, a state chartered credit union, or a group of unlicensed investors," said Warren, in her speech to the Financial Services Roundtable.

Continue reading at…

More Families, Friends Move In Together

From 2005 to 2009, American families took about 3.8 million extended family members in to their home to live with them. Due to financial strain, more and more households now have multiple siblings or family members living under one roof. New census data found that extended relatives now make up 8.2% of family households, up from 6.9% in 2005.

USA Today reports

    Fueled by the dismal economy and high unemployment, more Americans — friends and families — are doubling up.

    From 2005 to 2009, family households added about 3.8 million extended family members, from adult siblings and in-laws to cousins and nephews. Extended family members now make up 8.2% of family households, up from 6.9% in 2005, according to Census data out this week.

    "Clearly, a big part of that is the economic recession and housing costs," says Stephanie Coontz, co-chair of the Council on Contemporary Families, a non-profit research association. "We're seeing a shift away from the 1950s and 1960s mentality against extended families," when "modern" women did not take in aging parents for fear of hurting their marriage.

    There are also signs of a shift from family households. For the first time in more than a century, more than half of people aged 25 to 34 have never been married.

    The number of people in non-family households — those whose members are not related — grew 4.4% from 2005 to 2009, faster than the 3.4% growth for family households.

    "It's a realistic recognition that while a good, healthy nuclear family is a valuable thing to have, it's not the only family form people are going to live in all their lives," Coontz says.

Read more here

Regulatory Squabbles Threaten Financial Reform


The initial confrontation before the Senate Banking Committee didn’t come from the expected parties, Sheila Bair of the Federal Deposit Insurance Corp. or Treasury Secretary Timothy Geithner. It was between Geithner deputy Neal Wolin and the committee chairman.

The issue: Would Geithner be a good-faith participant with other regulators?

The answer was Geithner would, Wolin said. Moreover, he will head the council of regulators when it meets for the first time Friday. This seemed important to Sen. Christopher Dodd, D-Conn., who noted that the infighting and lack of communication between agencies was partly responsible for the regulatory breakdown that failed to forecast and address the financial crisis.

“There has to be a change in how we operate,” Dodd told the panel.

Committee officials and Treasury Department officials told MarketWatch that Geithner wasn’t invited, while Wolin was. They also said all of the agencies have been cooperating.

Five Ways to Save Money on Thanksgiving Travel Now

Since tomorrow is the beginning of October, taxpayers across the country are beginning to make travel arrangements for the upcoming holiday. Since so many members travel to see family for Thanksgiving, the expenses can quickly add up. Earlier today I came across this article from with advice on how to save on your holiday travel arrangements. You can find a few of the tips below, or check out the full article here.

1. Book now. For the last few weeks, editors at have monitored prices between 100 of the most popular cities for Thanksgiving travel and found that fares are slowly dropping as we approach the end of the month. The same trend occurred last fall, when airlines put Thanksgiving fares on sale in early October, Banas said. At Bing, fareologists said there are 50% more price drops during the holidays if you know how to look for them.

2. Set alerts. Sites that let you search flights on multiple airlines at the same time, like Expedia, Bing and Kayak, will track prices for you routes of your choice. When the prices fall, they will send an alert to your e-mail. These alerts will help you benchmark prices over several days.

3. Be flexible. If you plan to leave the Tuesday before Thanksgiving and return the Sunday after, you could pay as much as $170 more for your ticket, said Genevieve Shaw Brown, Travelocity's senior editor. Some experts suggest that traveling on Thanksgiving day is a good way to snag a cheap seat. Most travelers stay on average for five-and-a-half days, so extending your trip, or shortening it, could also lower your ticket price.

"Consider flying out early on Thanksgiving day itself, when flights can be exceptionally discounted and airports less crowded," said Darren Frei, editorial director at "But be aware that you always run the risk of delays or cancellations, which could mean missing out on the big feast."

The New Overdraft and Debit Laws Explained

According to reports, in the year 2006 overdraft fees accounted for approximately 6% of banking revenue in this country. Fortunately, on August 15th a handful of new laws went into affect to protect consumers in this country from excessive banking fees. However, in addition to targeting overdraft fees and debit cards, the new rules also have a significant impact on gift card practices in this country. To help all of my readers understand the full affect of the new laws, I have put together the following article explaining the most important new overdraft and gift card rules.

I. Overdraft Protection Laws

    What is overdraft protection?

    Before the new law was passed, banks could automatically enroll customers in overdraft protection, which would allow you to charge more than you had in your checking account. Instead of declining the transaction, the bank would approve it, and then charge you with a $20-40 overdraft fee.

    Opt in or out

    Starting August 15th, banks were forced to discontinue overdraft protection services unless customers sign up for it. This means you can decide whether or not you want your card to get approved when you have insufficient funds.

    Disclosure mailers

    As part of the new laws, financial institutions have been required to notify customers of how overdraft protection will affect their bank account. This is because of new disclosure laws that aim to increase consumer transparency in the banking industry, and also explains why you have probably received extra mail from your bank over the past few weeks.

    Checks and bills

    According to the new law, banks can still charge overdraft fees for checks or automatic withdrawals from your account that are higher than your available balance. The overdraft fee rules only apply to ATM debit and check card transactions. You bank may have an option to turn off all overdraft options, but you should ask your financial institution for more information.

    Alternative overdraft protection

    There are other ways to protect yourself from having your debit card declined than enrolling in overdraft protection. If your bank offers online banking then you could make a habit of checking your balance every day to make sure you do not overspend. Some financial institutions also offer cell phone alerts when your balance is low.

II. Gift Card Laws


    Until now, the gift card industry has gone relatively unregulated. However, the new overdraft and debit laws also have implications on gift cards. As of August 15th, companies that issue gift cards cannot charge excessive fees that lower the card’s available balance. The new law limits the number of fees that can be charged to a one-time fee when the card is purchased, and only one additional charge per month. Additionally, inactivity fees cannot be charged at all unless the card has not been used for over a year.


    The new law states that gift cards cannot expire for at least five years. Prior to this new rule, some gift cards would expire in as little as a year.


    Much like the new bank laws, companies who offer gift cards must now disclose fees and expiration dates to customers. For gift cards, the disclosure must be on the card itself, along with a toll-free number or website to find more information if need be.

    Prepaid debit and phone cards

    Unfortunately the new gift card laws do not apply to prepaid debit cards or prepaid phone cards; the rules only apply to gift cards.

Wednesday, September 29, 2010

5 Ways to Get Your Retirement Back on Track

A lot of Americans have seen their retirement plans interrupted in the bad economy. According to CNN, nearly half of the taxpayers in this country worry they will not have enough money to retire comfortably. This is up from 29% in 2007, a report from the Employee Benefit Research Institute found.

But the truth is, you can still get to your destination. "Not everyone is going to be able to retire exactly the way they want," says Denver financial planner Mark Brown. "But I talk to people all the time who overestimate the scope of their problem and underestimate their ability to do something about it."

Here are a few strategies for navigating five of the most common retirement roadblocks.

Roadblock #1: You're carrying a big mortgage

The problem: It used to be that Americans aimed to cross into retirement free of debt. But if you're in your fifties or sixties, chances are you aren't planning a mortgage-burning party anytime soon. The Joint Center for Housing Studies at Harvard says that 63% of homeowners ages 55 to 64 have mortgage or home-equity debt, up from 49% in 1989. In addition, a third of retirees carry credit card balances, reports the Federal Reserve. Such liabilities can be a dead weight in retirement -- you'll have to make the payments even if your expenses soar or your portfolio plummets.

Solution #1: Erase the debt if you can. Assuming you have cash savings in excess of the balances (besides emergency funds, that is), it usually makes sense to pay debts off around the time you retire. But zero out HELOCs and credit cards first. "You don't want a variable rate going into retirement," says Scottsdale financial planner Jacob Gold.

How 3 couples bust through retirement roadblocks

As for your mortgage, if you're two-thirds through the term, you're not benefiting much, if at all, from the interest write-off. And after taxes you're unlikely to earn more in risk-free investments than the cost of the debt, a recent Center for Retirement Research study found. That said, if you'd have to pull from tax-sheltered accounts to pay off the balance, you may want to consult a financial planner about whether doing so would be worth the tax bite.

Continue reading at…

IRS Issues Guidance on Expanded Adoption Credit Available for Tax-Year 2010

Earlier today the IRS published a new press release with guidance on the expanded adoption credit for the 2010 tax year, which was included in the Affordable Care Act. The IRS also released a draft version of the form that eligible taxpayers will use to claim the newly expanded adoption credit on 2010 tax returns filed next year.

The Affordable Care Act raises the maximum adoption credit to $13,170 per child, up from $12,150 in 2009. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply.

In addition to filling out Form 8839, Qualified Adoption Expenses, eligible taxpayers must include with their 2010 tax returns one or more adoption-related documents, detailed in the guidance issued today.

The documentation requirements, designed to ensure that taxpayers properly claim the credit, mean that taxpayers claiming the credit will have to file paper tax returns. Normally, it takes six to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. The IRS encourages taxpayers to use direct deposit to speed their refund.

Taxpayers claiming the credit will still be able to use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.

Consumer, Tax Groups Call For Ban On US Tax Strategy Patents

From the Wall Street

Consumer and taxpayer organizations urged Congress on Wednesday to ban the patenting of tax strategies, saying they "pose a significant threat to American families and businesses."

U.S. law allows for the patenting of a system or method for reducing or deferring taxes. The number of tax-strategy patents has grown to 117 issued and 151 pending, according to a coalition of 18 taxpayer and consumer groups including the American Institute of Certified Public Accountants and the U.S. federation of state Public Interest Research Groups. The coalition said it fears an "even greater explosion in both applications and patents issued over the next several years."

Such patents may creating a monopoly for patent holders to determine who can and cannot take advantage of parts of the tax code, the groups said. Meanwhile, tax advisors, who are generally not patent experts, have the burden of being aware of such patents and face potential lawsuits for violating them.

The coalition urged lawmakers to include the ban in a tax bill or other piece of legislation Congress must attend to before adjourning.

40 States Bank on Rising Tax Revenue In 2011

According to a new study 40 out of 50 states in the U.S. are anticipating a rise in tax revenue next year. Corina L. Eckl, author of the report and director of the fiscal affairs program at the NCSL, claims that 2011 will be the turning point for many local economies.

The Associated Press reports:

    The vast majority of state governments are anticipating a rise in tax revenues this year after two years of sharp drops. Analysts caution that most states will face large budget gaps in the next few years.

    Forty states forecast having an increase in tax receipts in the current fiscal year, according to a forthcoming report by the National Conference of State Legislatures. Slow economic growth is boosting proceeds from income and sales taxes.

    That could reduce the impact of states' budget struggles on the economy. State budget shortfalls have led to widespread layoffs, tax increases, spending cuts and other measures that have restrained economic growth.

    "We do think 2010 is the bottom and we are at a turning point," said Corina L. Eckl, director of the fiscal affairs program at the NCSL and author of the report.

    Still, state officials aren't without enormous challenges. States will lose federal stimulus money in coming years and will struggle to close large budget gaps. Tax revenues are well below pre-recession level. High unemployment puts heavy demand on state-run social service programs.

Continue reading at…

Tuesday, September 28, 2010

Obama Signs Bill Giving Tax Cuts, Loan Help to Small Businesses

President Obama signed the fourth job creation measure of the year in to law yesterday, which is expected to be the last before the midterm elections November 2nd. The bill will provide tax cuts to small businesses, and aims to promote job creation. reports:

Obama signed the Small Business Jobs Act during a ceremony in the East Room of the White House. It is the fourth jobs measure to clear Congress this year and is likely the last before the Nov. 2 midterm congressional elections.

The bill, which won final congressional approval last week, provides billions of dollars worth of tax cuts over the next 12 months, with the bulk coming through “bonus depreciation,” which allows companies to more quickly write off the cost of purchases. It also revives stimulus provisions cutting fees and increasing limits on loan guarantees offered by the Small Business Administration.

IRS Wage Garnishments

My team put together another great tax advice video last week. This time host James Owen explains IRS wage garnishments. You can watch the embedded video below or visit my YouTube channel for more great tax videos.

IRS: No More Tax Forms In The Mailbox


Electronic filing of tax returns has become so popular that the Internal Revenue Service will no longer automatically mail a traditional paper form.

"We're finding that more and more people are choosing to e-file, and the number of paper returns is going down," said IRS spokesman Anthony Burke. He told CNN Tuesday that the agency last year mailed the old-style set of paper forms, tables and instructions to just eight percent of the nation's taxpayers.

Burke said 96 million taxpayers this year have filed electronically, with another 20 million filing through professional tax preparers. The IRS hopes to save $10 million a year by not automatically mailing the materials.

Those who prefer hardcopy documents can still find them at libraries, post offices and walk-in IRS offices around the country. After Jan. 1, they can request a mailing through the IRS toll-free number, 800-829-3676.

The materials will also be available to download and print out from the IRS website:

Recovery.Gov a Model for Transparency, the government funded site created to track the spending of government stimulus money, is celebrating it’s one year anniversary today. As this article from USA Today explains, the site has become a model for spending transparency and led to the creation of other sites such as

Of the $814 billion in government stimulus spending, there's $18 million that could forever change the way government spends money.

That's how much the Recovery Accountability and Transparency Board spent to create, the website that tracks where the government's stimulus money goes.

The website turns 1 year old today. While it's had a number of publicized flaws, the site already has become the template for how the government will collect and report on its spending.

On Friday, the federal government will begin requiring recipients of non-stimulus money to report to where that money's going — just like the does for stimulus funds.

"For good or bad, the needle has been moved by," says Gary Bass, founder of OMB Watch, a non-profit group that tracks federal spending.

The requirement to make federal spending transparent started before the stimulus. In 2006, Congress required that the government create — but efforts to get federal recipients to report where the money went fell almost two years behind schedule.

Continue reading at…

Monday, September 27, 2010

Questions for the Tax Lady: September 27th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply. I will do my best to get an answer for you!

Question #1: Taxes are not our only debt, we lost our home, cars and have several medical bills, and collections along with tax levies coming all the time. Are taxes dischargeable in bankruptcy, we have to file chapter 7 anyway, and our attorney thinks he get our largest tax debt included since it is over 4 years old now.

Answer: I’m so sorry to hear of your difficulties. While not for everyone, bankruptcy can be a lifesaver for those drowning in debts.

To answer your question, some tax debts can be discharged through a Chapter 7 bankruptcy filing. There are five criteria for determining if the federal income tax debt is dischargeable:

  1. The due date for filing the tax return associated with the tax debt is at least three years ago.
  2. The tax return was filed at least two years ago.
  3. The tax assessment is at least 240 days old. (This is one that trips people up. Make sure you know when the IRS officially assessed the debt.)
  4. The tax return was not fraudulent.
  5. The taxpayer is not guilty of tax evasion.

If your bankruptcy attorney is advising you to include your tax debts in the bankruptcy filing, and you are confident you meet the above criteria, then I would trust your attorney. If you are not sure your tax debt meets these requirements, you may request your tax transcripts from the IRS to verify the dates of the debt assessment, the due date of the returns and more.

Question #2: If you missed filing a tax return for two years, can you still get a payment plan from the IRS?

Answer: The IRS offers payment plans called Installment Agreements for people who are unable to pay their entire tax bill at once. However, there are some sticking points:

  1. The IRS will not enter into an Installment Agreement with you until you are 100% compliant in your tax filings. Before you apply for an Installment Agreement, find a qualified tax professional to help you prepare and file the missing tax returns.

  1. The IRS bases the amount of your monthly payment on your ability to pay, so be prepared for a much higher payment amount than you might hope for. The IRS has very specific guidelines for determining how much you should be paying them each month, and many taxpayers suffer from a little sticker shock when they see how much the IRS expects.

Once you’ve filed the missing returns, and have your financial information handy, fill out Form 9465 Installment Agreement Request, or visit and click on I Need To… Set Up a Payment Plan from their menu options.

Congress Punts on Taxes

According to the Wall Street Journal Democratic members of congress have decided to wait until after the November elections to decide the fate of the Bush tax cuts. Unfortunately, the move raises uncertainty for small business owners, and taxpayers across the country. It will also create a huge battle over taxes at the end of this year.

    If returning lawmakers don't pass legislation by Dec. 31, the expiration date of the cuts, tax rates would rise not only on income, but also on estates, capital gains and dividends. Important corporate tax credits and relief from the Alternative Minimum Tax also are up for renewal.

    Democratic leaders and President Barack Obama made the proposal to extend the middle-class tax breaks a centerpiece of their midterm campaign strategy. They now face the possibility their members are vulnerable to Republican charges that they have failed to prevent taxes from rising for almost everyone.

    Congressmen from both parties said the toxic politics of taxes and the crush of issues to be resolved increased the likelihood all the Bush-era breaks, including those for higher earners, would be extended at least for a year or two. But Mr. Obama could still veto such a bill.

    For now, taxpayers confront a number of worrisome scenarios, including the possibility Congress might deadlock on the issue in the post-election "lame duck" session, resulting in across-the-board tax increases.

    With taxes a hot-button issue on the campaign trail, lawmakers threw in the towel Thursday until after the elections. Sen. Richard Durbin, the No. 2 Senate Democrat, said, "The reality is, we are not going to pass what needs to be passed to change this, either in the Senate or in the House, before the election."

Continue reading at…

IRS Scales Back Uncertain Tax Position Requirements


Internal Revenue Service Commissioner Doug Shulman said Friday that the IRS has been listening to complaints about its plans to require companies to disclose their uncertain tax positions and is relaxing some of the original proposals while phasing in the schedule over five years.

In addition to the five-year phase-in period, there will be no reporting of a maximum tax adjustment, no reporting of the rationale and nature of uncertainty in the concise description of the position, and no reporting of administrative practice tax positions.

Starting with the 2010 tax year certain corporate taxpayers under the jurisdiction of the IRS’s Large Business and International Division will be required to file a Schedule UTP with their Form 1120. Schedule UTP requires the disclosure of a taxpayer’s uncertain tax positions and is intended to reduce the time it takes to find issues; ensure that the IRS and taxpayers spend more time discussing the law as it applies to their facts, rather than looking for information; identify areas of uncertainty requiring guidance; and help prioritize selection of issues and taxpayers for examination.

After receiving comments from worried companies, their accountants and attorneys, along with various industry groups, the IRS announced Friday that it is expanding its policy of restraint in connection with its decision to require certain corporations to file Schedule UTP and will forgo seeking particular documents that relate to uncertain tax positions and the workpapers that document the completion of Schedule UTP.

In addition, the IRS released the guidance it is providing to the examiners and other personnel in its Large Business and International Division who will be working with corporate taxpayers on compliance, along with a final version of Schedule UTP and revised instructions for filling it out.

Fact-Checking the Tax Provisions in the 'Pledge to America' has published a report on the Republican Party’s Pledge to America and has criticized a number of "dubious factual claims." Check out their commentary on a number of tax provisions below, courtesy of the Tax Prof.

Pledge, page 14: Unless action is taken, a $3.8 trillion tax hike will go into effect on January 1, 2011 that will unravel these policies. A family of four with a household income of $50,000 a year will have to pay $2,900 more in taxes in 2011.

Fact: True, but misleading. What the Pledge fails to note is that Obama and Democratic leaders in Congress have consistently promised to extend the Bush tax cuts for all families making less than $250,000 a year, and singles making less than $200,000. It’s true that hasn’t happened yet, but the reason is that several House and Senate Democrats are agitating to extend the cuts for everybody, even those with the highest incomes.

Congress might yet fail to extend most or all the cuts before they are scheduled to expire next year. As we reported in a Sept. 3 Ask FactCheck itemon this issue, there’s always a possibility that Congress will grind to a halt in a stalemate. And sure enough, on Sept. 23 Senate Democrats announced they would put off any vote on extending the cuts until after the election. A spokesman for Democratic leader Harry Reid of Nevada said, "Democrats believe we must permanently extend tax cuts for the middle-class before they expire at the end of the year, and we will."

Pledge, page 14: [Obama] also wants to raise taxes on roughly half of small business income in America.

Fact: This is an exaggeration. Republicans are equating "net positive business income" reported on individual returns with "small business income," which isn’t correct. They rely on a report from the nonpartisan staff of the Joint Committee on Taxation (p. 12), which estimated that about 3% of taxpayers who have any business income on their personal returns would see a tax increase under Obama’s proposal, and that those 750,000 taxpayers account for about half of all the business income reported.

But some of that income is from big businesses raking in tens of millions of dollars a year. The JCT stated quite clearly that "These figures for net positive business income do not imply that all of the income is from entities that might be considered ’small.’" Some in fact are quite large, and those big businesses account for a good chunk of that income.

The JCT said: "For example, in 2005, 12,862 S corporations and 6,658 partnerships had receipts of more than $50 million."

Republicans do have a point here. Many small businesses and some large fraction of small-business income will be adversely impacted by raising the top rate on individual taxpayers.

The fact is, though, that the JCT couldn’t estimate how much of the total business income was accounted for by "small" businesses, or how many of the 750,000 individuals affected own "small" busineses. What we do know is that a good deal less than half the small business income, and something less than three percent of small business owners, would be subject to higher taxes.

Pledge, page 28: Roughly 16,500 IRS auditors, agents, and other employees may be needed to collect the hundreds of billions of dollars in new taxes levied on the American people by the new health care law.

Fact: This is simply not true. As we reported last March, this figure "stems from a partisan analysis based on guesswork and false assumptions, and compounded by outright misrepresentation." For an eye-opening account of how Republican staff members of the House Ways and Means committee came up with this inflated figure, see our Ask FactCheck item posted March 30. Most of what the IRS will do under the law is hand out tax credits, not collect penalties.

Bank Fee Whac-a-Mole: New Charges Hit Accounts

Since the CARD act, and new consumer protection laws have been put in to place, you may have noticed some mysterious new fees appearing on your bank statement. You are not alone, almost every major financial institution has added new fees to make up for losses in revenue.

To assist consumers, CNN put t together a bank-by-bank description of the new charges you can expect. You can find an excerpt below or check out the full post here.

"It's like you've got a sinking boat, where you plug one hole and another one springs up," said Curtis Arnold, founder of "You can shut down one egregious fee, but that doesn't mean other fees aren't just going to start popping up elsewhere."

Here's a bank-by-bank look of what to expect.

Bank of America: Just last week, Bank of America said it plans to raise minimum balance requirements over the next 12 months and charge a monthly account fee for customers who can't maintain those balances.

"We currently estimate over time through these and other items we are working on that we will have the ability to offset a substantial majority of the revenue from the various regulatory changes," Bank of America (BAC, Fortune 500) CEO Brian Moynihan said in a presentation to investors last week.

Customers enrolled in the lender's new eBanking checking account will be charged $8.95 per month if they opt to receive paper statements and visit tellers instead of banking online. Since the launch of eBanking in August, nearly half of all new checking accounts fall into this category.

Earlier this year, annual fees ranging from $29 to $99 were applied to a variety of Bank of America credit card accounts.

Continue reading at CNN…

Prepared Remarks of IRS Commissioner Doug Shulman to the American Bar Association

In a new press release, the IRS shared the remarks of Commissioner Doug Shulman to the American Bar association. He made the speech in Toronto, Canada.

It is my great honor and privilege to be in Toronto addressing the ABA.

It is a very busy time at the IRS. And while I could speak to you today about many important issues, ranging from:

Our international efforts, including the recent announcement of the realignment and renaming of our Large and Mid-Size Business Division to Large Business and International;

To our return preparer initiative;

To our efforts to implement recent legislation;

I would like instead to focus today on transparency which is part of our larger strategy to get to and resolve taxpayer issues more quickly.

I have been clear since my first day on the job that I thought transparency and increased information flow were the key to the future of sound, fair and efficient tax administration.

Continue reading at…

Jay-Z, Buffett and Forbes on Success and Giving Back


    Neither Jay-Z nor Buffett would admit to being nervous. It was their behavior that gave them away. Jay-Z the wordsmith said little at first but stared at Buffett intently, taking in every word. He ordered what Buffett ordered: a strawberry malt, thin. He barely touched it. Buffett never stopped talking, telling childhood stories about stealing syrup from nickel Coke machines and peeling off zingers. "When you see me reach for the check," he told the photographer, "you'll know I'm posing." They warmed up quickly and were soon laughing every minute or so. As they left Jay-Z headed over toward his Escalade. Warren called him back, "I'll give you a lift. Sit up in the front with me. My rates are very competitive."

    Steve Forbes: You two are unique. In very different spheres you've each reached a level of success that's almost legendary. What did you do that made you different?

    Warren Buffett: Well, I was lucky that I got started early. My dad happened to be in the investment business, so I would go down to his office on Saturdays. At age 7 or so I started reading these books that were around the place. I knew what I wanted to do early. That's a huge advantage.

    You don't need a lot of brains in this business. I've always said if you've got an IQ of 160, give away 30 points to somebody else, because you don't need it in investments. What you need is emotional stability. You have to be able to think independently, and when you come to a conclusion you have to really not care what other people say. Just follow the facts and your reasoning. That's tough for a lot of people. But that part, I was just lucky with. I was born that way.

Read more here

Postal Service Fine Without Taxpayers

As the US Postal Service continues to struggle with revenue problems, many taxpayers have become worried about the possibility of another huge bailout effort. However, according to the Washington Times representatives from the USPS have no desire to request a taxpayer-funded bailout.

It's election time in an era of polarization, but that doesn't excuse misleading the public with claims that the U.S. Postal Service seeks a taxpayer bailout ("Time for another government bailout," Commentary, Sept. 21). Nor does it excuse congressional interference with bargaining between the Postal Service and its unions. Unfortunately, the article by Rep. Darryl Issa fails on both counts.

The Postal Service doesn't seek a taxpayer bailout. It proposes to use a surplus in its pension account within the Civil Service Retirement System (paid for by postage rate payers and postal employees - its own funds, not taxpayer funds) to cover the cost of future retiree health benefits. Congress imposed the cost of pre-funding these future retiree health benefits - $5.6 billion per year - on the USPS in 2007. This requirement, which no other agency or business in America faces, is the major cause of the recent financial crisis at the USPS, not the Internet or the recession. Without the pre-funding requirement, the USPS would have been profitable two of the past three years.

The USPS also has plenty of flexibility to downsize - it has cut more than 100,000 jobs since the recession began in late 2007. The no-layoff contractual clause the congressman criticizes covers only workers with more than six years of service - leaving some 160,000 career and noncareer employees subject to layoffs.

Sadly, these problems are worsened by congressional inaction on resolving the unfair pre-funding burdens on the Postal Service. Yet Mr. Issa proudly vows to block legislation to address the situation.

Politicizing one of America's great institutions by getting Congress involved in the collective bargaining process is the last thing we should do. The Postal Service has not received a dime of taxpayer support in more than 25 years and offers the best, most affordable service in the world.

Thursday, September 23, 2010

Warren Buffett: "We're Still In a Recession"

Despite a study earlier in the week asserting the recession has ended, famed investor Warren Buffet claims that we are still in a recession. He admits that the economy will recover eventually but that it is going to take a few more years.

MSN reports

    On Monday, the National Bureau of Economic Research said the world's largest economy ended an 18-month recession in June 2009, but cautioned that its assessment did not mean normal activity had resumed.

    Buffett said he defines a recession differently from the NBER, saying it ends when real per capita gross domestic product returns to its pre-downturn level.

    President Barack Obama said on Monday that economic weakness is "still very real" for the millions of Americans who are out of work, have seen the value of their homes fall, or are mired in debt.

    Buffett, 80, runs Berkshire Hathaway Inc, which has roughly 80 operating businesses. "A great majority" of these businesses are "coming back slowly," he said.

    Berkshire's operations cover a broad swath of the economy, including the Burlington Northern Santa Fe railroad, Dairy Queen ice cream, Geico auto insurance, and luxury jewelers such as Borsheim's.

    Shipments at Burlington Northern are "61 percent of the way back," Buffett said. "Our carpet business, our brick business, our insulation business, they're not back 61 percent, but they are moving back."

Read more here

4 Ways to Cut Winter Energy Bills

Today is the first day of autumn, and Americans across the country are preparing for the cold season, and heating bills that will follow suit. has put together a helpful new article with advice on how to cut down on your energy bills this winter, you can find a few of their tips below or check out the full list at

Storm windows that go inside, not out

Typical cost: $1,875*

Annual energy savings: $770

Pays for itself within: 3 year

If your windows are old and drafty, but you're not eager to spend $1,000 apiece to have a professional install energy-efficient vinyl-clad wood replacements, there's another alternative: interior storms.

"They're a better value," says Bruce Harley, technical director of Conservation Services Group in Westborough, Mass., and author of Cut Your Energy Bills Now.

These products, which typically have an aluminum frame that spring-loads to fit your window, generally cost the same as or less than exterior storms and are just as energy saving. (Both can reduce heat loss by 25% to 50%.) But they're much easier to put in and take out; no more teetering on a ladder or paying someone else to.

Thermal leak detector

Typical cost: $50

Annual energy savings: $220

Pays for itself within: 5 months

Wonder why your heating bills are high even though you've done everything you can think of to make your home airtight?

You could hire a professional to do a home energy audit, which will set you back $100 to $400. (Some utility companies offer free audits, but they may not be as comprehensive.) Or you could buy a thermal leak detector.

Current models, such as the Black & Decker Thermal Heat Detector, accurately pinpoint where energy seepage is happening. (Two common trouble spots: around outlets and light fixtures.)

Democrats Divided on Bush-Era Tax Cuts Vote


Democrats cannot decide whether to hold a vote on extending tax cuts, as some lawmakers fear the issue could hurt their re-election chances in November.

Senator Max Baucus, the Senate Finance Committee chairman drafting a bill to extend tax cuts for all but the wealthiest taxpayers, told reporters he would like a vote before the elections but there was no agreement in the party to do so.

President Barack Obama and most of his fellow Democrats want tax cuts enacted under former President George W. Bush to be extended only for the first $200,000 of a person's income, saying the country cannot afford the cuts for higher earners.

Republicans want the lower rates renewed for all Americans, regardless of income, and say that losing the cuts would hurt small businesses and job creation just as the economy is recovering from its worst recession since the 1930s.

Voter anger over the weak economic recovery has produced heavy headwinds for Democrats ahead of the congressional elections in which Republicans are expected to make big gains and possibly regain control of Congress.

For Many, Health Care Relief Begins Today

A number of the provisions provided in the Patient Protection and Affordable Care Act will take effect today, offering relief to thousands of Americans. The act now prohibits insurance companies from excluding children because due to pre-existing health conditions, and insists they offer coverage to children under 26 on their parents insurance. Read more from the story below.

Sometimes lost in the partisan clamor about the new health care law is the profound relief it is expected to bring to hundreds of thousands of Americans who have been stricken first by disease and then by a Darwinian insurance system.

On Thursday, the six-month anniversary of the signing of the Patient Protection and Affordable Care Act, a number of its most central consumer protections take effect, just in time for the midterm elections.

Starting now, insurance companies will no longer be permitted to exclude children because of pre-existing health conditions, which the White House said could enable 72,000 uninsured to gain coverage. Insurers also will be prohibited from imposing lifetime limits on benefits.

The law will now forbid insurers to drop sick and costly customers after discovering technical mistakes on applications. It requires that they offer coverage to children under 26 on their parents’ policies.

Continue reading at…

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Even With Extended Tax Cuts, You Might See Smaller Paychecks

All the tax hub-bub these days is all about the Bush tax cuts and whether Congress will extend, all, some or none of them. But as my fellow tax blogger Kay Bell of Don’t Mess with Taxes points out, if Congress doesn’t decide quickly, we could all be seeing smaller paychecks next year, even if all the tax cuts are extended.

Why? It all revolves around tax tables. Every year, the IRS creates tax withholding tables. This is what your payroll department uses to determine how much money to withhold from your paychecks. It takes the IRS considerable time to update these tables. According to the IRS, the beginning of November is their deadline for distributing the tax withholding tables to employers. So, if the House and Senate haven’t made up their minds by then, the tables will have to be distributed with the pre-2001 tax rates. And that means more money taken out of your paycheck come January 1.

Whenever Congress makes a final decision, the IRS will start the process to update the tax withholding tables, meaning you will eventually get the benefits of any extended cuts. But it will take time, so for a while you may be seeing a much smaller paycheck than you were expecting – and right after the holidays that could really hurt.

Read more from Don’t Mess With Taxes here.

Wednesday, September 22, 2010

Treasury's Bailout Overseer Quits

Treasury Department assistant secretary Herb Allison, who oversaw the bank bailout fund, stepped down this morning. He reportedly decided to step down because the program was nearing an official end. According to

    Allison had been in charge of the $700 billion Troubled Asset Relief Program that is scheduled to expire in two weeks.

    "With the TARP program entering a new phase and continuing to wind down, I have decided that now it is the right time for me to step down," Allison said in an e-mail to staff members that the Treasury made available.

    He said he was returning to Connecticut after two years' service in Washington to spend time with his wife, who had been unable to join him during that time. The chief counsel for the financial stability office, Tim Massad, will take over as acting secretary on September 30.

    Though TARP is officially ending on October 3, after which it cannot make any new investments in financial institutions, its work in recouping the money that it did lend will continue for years.

    Allison is one in a line of officials preparing to take their leave from Washington, many of them more senior, including Larry Summers, director of the White House's national Economic Council; Council of Economic Advisers Chair Christina Romer and White House budget chief Peter Orszag.

    Treasury Secretary Timothy Geithner, in a town-hall style event with Treasury staff, lavished praise on Allison and cast TARP as a highly effective mechanism despite the fact that it was "a four-letter word" for lawmakers and most Americans who saw it as a handout for bankers.

Continue reading at…

Talk with Your Partner about Taxes

Last week my team put together another great tax advice video. This time hosts Edward Lester and James Owen sat down together to discuss the importance of talking with your partner about taxes and financial issues. You can watch the embedded video below or visit my YouTube channel for more great tax videos.

Tax Credit Bonanza for Small Businesses


    Across the country, small businesses are talking to their accountants about a hefty tax credit that could make health insurance a little more affordable.

    Six months after sweeping health care reform was enacted, the cost of health insurance remains one of the most pressing issues facing small businesses. Premiums typically run 18% higher for small businesses than for larger companies.

    The health care law called for the expansion of state-run exchanges aimed at helping small businesses find affordable coverage. But not until 2014. To bridge the gap, the law also established a slew of significant tax credits to small firms starting this year.

    The Internal Revenue Service has sent out millions of post cards to business owners and tax professionals alerting them to the tax credit. Business owners are still working to get their heads around the details, but it's a bit of bright news for those who'll qualify.

    "That would be fantastic," said John Wilson, owner of Artistic Kitchens and Baths, a cabinetry and interior design business in Southern Pines, N.C. Wilson pays 80% of the cost of insurance for six of his twelve full-time employees. The other six employees opt for insurance through other avenues, such as their spouse's plan. "Health care costs are really, really high and that has been a big, big problem," said Wilson.

Read the original story here

Analyst Who Called Recession End Sees Durable Rebound

Economist Thomas Lam accurately predicted the official end of the recession a year and a half ago, and now he is offering his opinion on economic recovery. He predicts that we will see the economy rebound, with less than a 20% chance of a renewed slump. reports:

    “The main risk to the U.S. economy today is really a prolonged period of mild growth rather than an imminent recession,” said Lam, the Singapore-based chief economist at OSK-DMG, a joint venture between Malaysian securities firm OSK Holdings Bhd. and Frankfurt-based Deutsche Bank AG.

    Lam’s May 2009 call that the U.S. would emerge from recession the following month -- confirmed this week by the National Bureau of Economic Research -- drew “quite a bit of heat because it was a time when things were still uncertain,” the 35-year-old analyst said in a telephone interview with Bloomberg News today. “Some thought the call too optimistic.”

    Lam, who published his prediction while working for his previous employer, United Overseas Bank Ltd., studied peaks in the number of U.S. jobless claims using a proprietary weighted- average formula to remove statistical “noise,” and found a correlation with economic turning points.

    “The model actually predicted it would be 394 weeks from the prior trough in November 2001” before the economy would begin growing again, Lam said. “It was actually 395 weeks.”

Read more here

Tuesday, September 21, 2010

Joe Torre Retiring as Dodger’s Manager

Those who know me know that I am no Dodger’s fan. I’m well known for teasing my Dodger-loving employees and friends all throughout baseball season – especially when they play my SF Giants. But the news of Joe Torre stepping down is big, no matter which team holds your heart. Torre is a legend, managing the Dodgers, and the Yankees before that, through some pretty incredible successes. According to MLB Fanhouse Torre’s career record is 2,318-1,990 over 29 seasons as a manager.

Torre is quoted as saying, "Baseball has been my life, and hopefully will continue to be my life in some capacity. When I came out here, it was just to find out if managing can be fun again, and it's been fun. ... But you have to make some decisions by instinct, and my instinct tells me it's time to go.''

Does this mean Torre is retiring altogether? My bet is no. I don’t think the 70-year old is quite out for the count. Don’t be surprised if you see him return for the 2011 season with a different team… perhaps the Mets?

The Details of Obama's $50 Billion Infrastructure Plan

Over Labor Day weekend, President Obama announced his plan for a new infrastructure reform plan. It is expected to cost around $50 billion and with the economy continuing to struggle Obama has pitched the proposal as a job creation package. However, many experts have suggested that it might have the opposite effect. The full contents of the plan have not yet been released. However, based on the information currently available, I have put together the following article so we may all become familiar with the President’s new stimulus plan.

Obama's Announcement

At “Laborfest” in Milwaukee the President Obama first announced his proposal for the $50 billion infrastructure plan. He specifically called the plan a "permanent policy change" rather than a quick fix for a big problem.

“We used to have the best infrastructure in the world and we can have it again,” Obama announced. “We want to change the way Washington spends your tax dollars; we want to reform the way we fund and maintain our infrastructure to focus less on wasteful earmarks and outdated formulas, and we want competition and innovation that gives us the best bang for the buck."

Roads, Railroads and Job Creation

The main idea behind this infrastructure plan is to do what its name implies: build and repair infrastructure. Obama’s plan aims to build 150,000 miles of new road, 4,000 miles of railroad, and 150 miles of runway. It would also work on establishing a next generation air traffic control system. Director of Transportation of America, James Corless, has come out in strong support of the plan. He said the American Society of Civil Engineers regularly gives our country's infrastructure "grades that parents would punish their children for bringing home."

Although many members of Congress agree that our infrastructure needs improvement, many disagree with the President’s new proposal. John Mica, the ranking Republican on the House Transportation and Infrastructure Committee, has already spoken out against Obama’s plan. He asserts that nearly two-thirds of the money allocated for infrastructure projects in the American Recovery and Reinvestment Act of 2009 have still not yet been spent. Mica has suggested working with the White House on a plan to use this money, and also warns that members of Congress are likely to be dubious about a massive spending bill this close to the November elections.

Job Creation

The main selling point of Obama’s proposal is the jobs it would create. However, economists are unsure about the number of new jobs the plan would actually generate. Goldman Sachs economist Jan Hatzius has claimed the proposal "could be helpful,” but is “unlikely to have a large effect on growth." The White House itself has even admitted that the plan would do little to create any jobs until later in 2011. There are also concerns that some tax changes to fund the bill would have a negative affect on the unemployment problem in the country.

Funding Options

Although it will be Congresses job to decide how to fund the legislation, President Obama has suggested closing tax loopholes to pay for the proposal. Specifically, they would like to eliminate the manufacturing tax deduction, and the depletion allowance for oil and gas companies. It is unclear at this point if these proposed changes would cover the full cost of the legislation or not.

Effect on Businesses

While the plan pushes job creation, some opponents believe it could negatively affect businesses, and cause additional job losses. Economists worry that closing certain business tax loopholes could lower revenue, and force some businesses to cut back on expenses, or lay off workers. However, supporters of Obama’s plan explain that highway spending is scheduled to decrease by 5% in the next year, and the infrastructure proposal would both save, and create thousands of construction jobs.

National Infrastructure Bank

As Obama announced, his plan aims to reform the way the federal government handles infrastructure projects. As such, he has proposed creating the National Infrastructure Bank to manage the new infrastructure spending. The new federally regulated bank would evaluate potential infrastructure projects, and decide which are the most significant and useful to our country and economy. Unfortunately, taxpayers have been very weary of banks and financial institutions since the bailouts of 2008 and this is likely going to be the most difficult part to sell to the American public.

‘Great Recession’ Over, Research Group Says

If you have not heard yet, according to the National Bureau of Economic Research (NBER), the great recession is officially over. This news may come as a surprise to the millions of Americans that are still struggling financially. Check out the following story from on this new announcement.

NBER said Monday that the recession which began in December 2007 ended in June 2009, which marked the beginning of an expansion. The announcement rules out the possibility of a so-called “double-dip” recession, because any new downturn would be seen as a brand new recession.

President Barack Obama said that even though the NBER officially named an end to the recession, the economy has a long way to go and much work to be done to become healthy again. "Something that took ten years to create is going to take a little more time to solve," Obama said at a town-hall-style meeting shown live on CNBC.

The NBER said it chose the June 2009 date based on examination of data including gross domestic product, employment and personal income.

"The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months," the NBER added in a press release on its website.

Continue reading at…

Jobs Picture gets Worse in 27 States

Although the recession may have officially come to an end, 27 states saw higher unemployment rates in August. This is almost double the number of states that saw jobless rates increase in July. According to CNN Money, the unemployment rate remained at 9.6% for the country and states such as Nevada, Michigan, and California are seeing rates above 12%.

Nevada had the worst rate for the fourth month in a row, at a record high of 14.4%, up from 14.3% in July. Michigan followed with 13.1% unemployment, unchanged from the prior rate, and California was third with a 12.4% rate, an increase from 12.3% in July.

Where does your state rank?

After Kentucky and Georgia joined the list, 13 states had unemployment rates above 10% in August, as opposed to 11 the previous month.

The jobless rates fell in 13 states, as opposed to 18 that saw decreases in July. Ten states and the District of Columbia had no rate change.

North Dakota remained the state with the lowest unemployment, posting a 3.7% rate, followed by South Dakota with 4.5% and Nebraska with 4.6%

Fed Considering Whether More Steps Needed to Fix Economy


Federal Reserve policymakers are wrestling with what additional steps — if any — should be taken to strengthen the plodding economy and drive down near double-digit unemployment.

Lots of debate is expected at today's one-day meeting. But few expect any major programs to be unveiled. Instead, many will be looking to see if the Fed offers clues about the timing of any new aid and what changes in the economy would trigger such a move. A statement from the Fed is expected about 2:15 p.m. ET.

To give the Fed extra time for discussions, the meeting is scheduled to start around 8 a.m. — earlier than when it has two-day sessions.

There are differing views on the Fed's main policymaking group — the Federal Open Markets Committee — about what should be done. And some pressure is off after a few mildly positive economic reports showed the pace of layoffs has slowed, shoppers' appetites to spend has picked up and factory production is growing.

The reports have helped to ease concerns about the economy slipping back into a new recession, giving Fed Chairman Ben Bernanke and his colleagues a little breathing room.

Another Tax that Democrats want to Raise from the Dead

While Congress continues to debate whether or not to extend the Bush tax cuts, some members of the Senate have reportedly been considering an estate tax hike. The tax expired at the end of last year and is scheduled to return at a rate of 55% in 2011. However, a couple of Congress members are suggesting a new 65% tax.

The Washington Post reports:

    The Senate Redistribution Caucus—Bernie Sanders (Vermont), Sheldon Whitehouse (Rhode Island), Al Franken (Minnesota), Sherrod Brown (Ohio) and Tom Harkin (Iowa)—are sponsoring the Responsible Death Tax Act to take the federal rate to 65% on large estates. Why stop at two-thirds, guys? Clearly, you think the government has a right to every penny a man makes in a lifetime.

    These same five plus Budget Chairman Kent Conrad of North Dakota also want to retroactively apply a death tax to January 1, 2010 on the estates of those who have already died this year. Their revenue grab gives new meaning to the phrase grave robbers. Too bad George Steinbrenner, who died earlier this year and whose family will be able to retain control of the New York Yankees in part because of the lack of an estate tax, can't come back from the dead and shout at these guys.

    It's not merely the super-wealthy who will pay these rates unless they shelter their assets in foundations the way that Bill Gates and Warren Buffett have. Estates with as little as $1 million in assets would get hit at the reinstated 55% rate. That $1 million has not been indexed for inflation, so each year more and more middle class families would pay when mom or dad dies. For hundreds of thousands of families, $1 million can easily be the value of the family home, furniture, jewelry, cars, plus a 401(k). All of this would be fair game for IRS confiscation.

    The ability to transmit wealth from one generation to the next is a core motivation for Americans to save, reinvest in the family business or accumulate wealth. A 1980 study co-authored by White House economic adviser Larry Summers on savings and capital accumulation in the first three-quarters of the 20th century found exactly that: Americans continue to save even as they get older so they can pass their lifetime legacies on to their kids. But if you can't take it with you, and you can't leave your lifetime earnings to your children or grandchildren, the motivation is to spend down wealth to zero at the time of death.

Read more here

Monday, September 20, 2010

Questions for the Tax Lady: September 20th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: can you download IRS forms online?

Answer: Absolutely! The IRS offers a vast majority of their forms online at The forms and publications library is convenient, simple and saves you a trip to your tax preparer’s office. I download IRS forms all the time. A few things to remember when downloading tax forms:

  1. Make sure the form is for the correct year. Tax rules change every single year, thus each tax form is updated each year. Using last year’s form can cause some big problems! How do you know what year the form is for? All forms should have the tax year in huge print in the top left corner.
  2. Make sure it prints properly! Once you’ve printed your form, take the time to compare it with the form on your computer screen. If your printer settings are a little off, the form can print incorrectly and that can cause you some pretty big tax headaches.
  3. Save yourself a world of trouble, and open up the instructions for any form you are going to use. Full instructions for each form are available for download as well. You may not need to print them (they are usually pretty long), but have them open on your screen, ready for when you have a question.

Question: can you deduct overdraft fees on your tax return?

Unfortunately, the answer is, no. The IRS opinion is that banking overdraft fees are really penalties, and therefore not deductible on your tax returns.

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